FaceBook - head of another DotCom crash?

[V8mate]

Facebook's IPO kicks off Monday (probably)

http://www.bbc.co.uk/news/business-17946598

In spite of being a (sometime) user myself, I can't help but wonder if it has already had its day. I could easily write a list of things which are 'wrong' with it (by wrong, I mean things which negatively affect users as well as things which stop them enjoying commercial success).

I think that people who pick up these shares are likely to get their fingers burnt within five years (assuming they hold them).

Anyone else think they make a bad bet? Are there any other 'dotcom' stocks which you think are also likely to slide sooner rather than later?

[muffinmenace]

I've always thought social media was a bubble ready to burst, but I have learnt my economics from the Ladybird books. The only one I can see being around longer is twitter due to it's nature of simplicity, and it's never ending source of fkups, sorry entertainment.

[stevejh]

With the level of worldwide usage and the growing integration with other websites I think Facebook is a better bet than a lot of the dot.coms that floated a few years ago. The lower valuation also makes it a bit more of a realistic bet. I think there's still a lot of growth to come but it's not going to be as dramatic as over the last few years.

[anonymous-user]

The difference is that Facebook already has a massive captive audience of "customers" who have now been with it so long that they'd struggle to wean themselves off it and for many it's a big part of their social life.

In the previous dotcom bubble people were investing big money into ideas and start ups who had loads of potential but not many actual customers and revenue.

I wouldn't be surprised to see it decline in the future, but I can't see it being a sudden crash.

[V8mate]

swerni said:

Now Colin, I know you're a business guru and everyfink

However.

Probably fair to say that they enjoy more commercial success than you could in a thousand life times.

I think every business in the land would love such bad commercial success

I aint no guru. I is a prophet now, innit. And weak ad hominems are poor form.

My point is that whatever they are achieving now, I believe it will be short-lived.

[JonnyFive]

I think Facebooks biggest problem is it's fking terrible to use at the moment. Sometimes it works well, others it's completely useless. They need to fix their problems. Plus, the iPhone App is junk and has been for months.

[WhereamI]

Facebook is a good business, the only issue with it is the valuation. At the levels being talked about there is a lot of future growth and profit already factored into the price and so it will be interesting to see if they can deliver.

[R11ysf]

V8mate said:

I aint no guru. I is a prophet now, innit. And weak ad hominems are poor form.

My point is that whatever they are achieving now, I believe it will be short-lived.

I also disagree and I don't even use facebook. However, if you have 600 million users (or whatever it is) imagine how you can branch out of just social media, which isn't in itself very profitable.

As most people now create events, gigs and parties on facebook imagine if they then branch out so you can book tickets on the facebook page and in doing so become ticket agents? £1 or £2 for every ticket booked is a HUGE profit for the amount of events that run through facebook pages.

Then imagine that they can get their market place to be successful. With a young audience they could become a new ebay. There are so many possibilities with a database of customers that big and as long as the innovation continues £100bn could be cheap. Don't get me wrong, I'm not going to be buying shares and am not going to be using facebook but to think that they are already on the decline is short sighted - this could just be the beginning.


On a separate note are you going to be doing the auction reports again? They were the reason i found this site - I LOVED those

[V8mate]

R11ysf said:

I also disagree and I don't even use facebook. However, if you have 600 million users (or whatever it is) imagine how you can branch out of just social media, which isn't in itself very profitable.

As most people now create events, gigs and parties on facebook imagine if they then branch out so you can book tickets on the facebook page and in doing so become ticket agents? £1 or £2 for every ticket booked is a HUGE profit for the amount of events that run through facebook pages.

Then imagine that they can get their market place to be successful. With a young audience they could become a new ebay. There are so many possibilities with a database of customers that big and as long as the innovation continues £100bn could be cheap. Don't get me wrong, I'm not going to be buying shares and am not going to be using facebook but to think that they are already on the decline is short sighted - this could just be the beginning.

Part of the rationale for my position is that they are not innovative, especially when it comes to the way that businesses are integrated/involved. And it's business involvement which will deliver the revenues which fuel the assumptions behind the IPO launch price.

Frankly, it matters not one jot whether every respondent to this thread disagrees with me though. Such is the marvel of the free market in ideas as well as stocks.

R11ysf said:

On a separate note are you going to be doing the auction reports again? They were the reason i found this site - I LOVED those

Thank you. The auction houses weren't so keen, unfortunately.

[youngsyr]

As others have pointed out, the value of facebook isn't just in what it's currently doing.

Consider the amount of personal information it holds and how much value could be created by using it in conjunction with new services or services that already exist and are provided by someone else, but do not currently have access to that information.

Some people have so much information on there you could put together a pretty accurate story of their life, preferences and relationships without ever actually having met them or anyone who knows them.

[russ_a]

The underclass have well and truly taken over facebook now making it an unpleasant place to browse. Now you might say that another social media site might come along and everyone will jump ship but Google have tried and failed, even with their resources!

Personally, I struggle to see how Twitter will turn a profit. Other than advertising (which my mobile app doesn't have) what do they have? No platform, no games etc. The data they hold maybe worth something, but they don't have the demo-graphical information that Facebook stores.

Yes they have lots of users, but if I had a supermarket where the goods are free I would have lots of customers too!

[sjg]

Their intention is to become infrastructure of the internet with all sorts of other things using them as a platform. Just look at all the other sites that let you log in with your facebook account. There's been all kinds of interesting stuff built on top of it by third parties too.

They have a vast amount of personal info about their 900 million active users, as well as 100PB of their photos and videos. They have various ways of monetising that - they make a fortune already just through highly-targeted advertising.

[Dracoro]

russ_a said:

The underclass have well and truly taken over facebook now making it an unpleasant place to browse.

I'm not sure I understand this, you choose who you "friend" on Facebook so if you're seeing a lot of "underclass", it's surely because they're the people you know.

I don't use FB much but I hardly ever see moronic crap on it because, on the whole, I don't have moronic friends

[Mobile Chicane]

From a marketer's perspective, at one point brands were piling into social media like rats after the Pied Piper, however I have yet to see even one case study which demonstrates a quantifiable financial return on investment.

I think CFOs are asking awkward questions of their marketing departments, and social media spend is slowing.

Facebook announced in March that they were partnering with web analytics companies Webtrends and Omniture in order to develop more robust tracking. However I say that until this happens, and the impact of social media marketing spend on sales can be proven, Facebook can't significantly grow its revenue.

[eldar]

Priced about $100 per user, who currently generate 1$ profit each. Seems a bit on the high side to me, but what do I know.

[davepoth]

Mobile Chicane said:

Facebook announced in March that they were partnering with web analytics companies Webtrends and Omniture in order to develop more robust tracking. However I say that until this happens, and the impact of social media marketing spend on sales can be proven, Facebook can't significantly grow its revenue.

And of course the users of Facebook push back HARD whenever they try and introduce new ways of pushing ads. However, the company is still growing (at some time this year they're expecting their 1 billionth user). Before long Facebook will know more about more people than any organisation in history, eclipsing even China and India. That's quite a thing to have.

[FourWheelDrift]

As long as the product keeps using Facebook then Facebook will continue to sell it's product to it's customers.

[speedy_thrills]

WhereamI said:

Facebook is a good business, the only issue with it is the valuation. At the levels being talked about there is a lot of future growth and profit already factored into the price and so it will be interesting to see if they can deliver.

Exactly, it's a good business but is it's value (by market cap.) really half that of Google?

In my view it's not better than rivals by a big margin, their product is simple and an innovative competitor could easily strip their customers.

[munky]

Inkyfingers said:

The difference is that Facebook already has a massive captive audience of "customers" who have now been with it so long that they'd struggle to wean themselves off it and for many it's a big part of their social life.

That's what they said about MySpace, until Facebook came along and ate their lunch. That's the risk with pure web businesses, someone else comes along with a better idea. Or, the users get bored and visit less often.

Another risk is that advertisers find that ads don't translate into clicks, and cut their spending on Facebook. Unlike Google, people don't visit Facebook to buy stuff. Plus, FB may have more info on their users than Google (although google is sneakier, using your browsing history), but FB's targeting doesn't seem to work terribly well. (I get bombarded with ads for online games, which are entirely wasted on me)

Finally, as others have said, there is at least a whiff of dotcom bubble in the air; not just this, but many other deals over the last few weeks, Instagram being just one of them.

For those reasons, I'm out.

[Dracoro]

MySpace had nowhere near the users/captive audience that Facebook has. I'm no FB fan but it's far better/bigger than MySpace and has become "ingrained" in popular culture in way the others never did. For that reason, people will need a VERY good reason to move away to something that, ultimately, will do the same thing.

Ads to a large captive audience is the marketeers dream, just a matter of doing it right so that the audience isn't put off (as well as FB striking the right deals and ways to make it work). It needs to be subtle and unobtrusive.

I'll echo what many have said, it's worth something but nowhere near the valuations banded around.